Under the deal, CuraGen is obliged to provide 80 drug targets, such as proteins and genes linked to the diseases, over the first five years of the collaboration. CuraGen would give Bayer access to its functional genomic technologies and pharmacogenomic expertise to ensure any drugs developed against the drug targets are given to appropriate patients.

The companies have committed to developing 12 drugs for treating obesity and diabetes that will be clinically tested.

"Ultimately, the companies will jointly commercialize drugs resulting from this alliance, and then share profits according to their respective contributions," the companies said in a statement.

CuraGen CRGN closed up $9-5/16 to $35-7/8 on the Nasdaq while Bayer shares fell 1.69 percent to 51.70 euros in Frankfurt.

In a second deal, Bayer has agreed to use CuraGen technologies to make their drug development process more efficient. Bayer will spend $124 million, including an $85 million equity investment in CuraGen, and $39 million in funding.

CuraGen specializes in functional genomics, the study of the function of genes and their related proteins, as well as pharmacogenomics – determining how different drugs affect different people based upon slight variations in their genes.

According to CuraGen, the deals will help the company develop a comprehensive database that specifies what types of genetic differences in people seem to account for favorable, or unfavorable, responses to different drugs.